The Russell 2000 is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.

Navigating this part of the market can be tricky, which is why we built StockStory to help you separate the winners from the laggards. That said, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.

Opendoor (OPEN)

Market Cap: $727.1 million

Founded by real estate guru Eric Wu, Opendoor (NASDAQ:OPEN) offers a technology-driven, convenient, and streamlined process to buy and sell homes.

Why Do We Think OPEN Will Underperform?

1. Number of homes purchased has disappointed over the past two years, indicating weak demand for its offerings

2. Historically negative EPS raises concerns for risk-averse investors and makes its earnings potential harder to gauge

3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

Opendoor is trading at $0.98 per share, or 0.1x forward price-to-sales. Read our free research report to see why you should think twice about including OPEN in your portfolio, it’s free .

TEGNA (TGNA)

Market Cap: $2.96 billion

Spun out of Gannett in 2015, TEGNA (NYSE:TGNA) is a media company operating a network of television stations and digital platforms, focusing on local news and community content.

Why Are We Hesitant About TGNA?

1. Products and services aren't resonating with the market as its revenue declined by 2.7% annually over the last two years

2. Projected sales decline of 10.7% over the next 12 months indicates demand will continue deteriorating

3. Free cash flow margin is forecasted to shrink by 9.5 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors

At $18.37 per share, TEGNA trades at 10x forward price-to-earnings. Check out our free in-depth research report to learn more about why TGNA doesn’t pass our bar .

Lovesac (LOVE)

Market Cap: $272.5 million

Known for its oversized, premium beanbags, Lovesac (NASDAQ:LOVE) is a specialty furniture brand selling modular furniture.

Why Are We Wary of LOVE?

1. Lackluster 6.4% annual revenue growth over the last two years indicates the company is losing ground to competitors

2. Estimated sales growth of 1.4% for the next 12 months implies demand will slow from its two-year trend

3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability